The Marxist theory of Imperialism

Two examples will illustrate the merits and the demerits of the Marxian synthesis as a problem-solving engine.

1. The Marxist theory of Imperialism

Vienna was its center; Otto Bauer, Rudolf Hilferding, Max Adler were its leaders.

The argument runs as follows.

Capitalist society cannot exist.

Its economic system cannot function without profits.

But profits are constantly being eliminated by the very working of that system.

And so the central aim of the capitalist class is to keep profits alive.

Accumulation accompanied by qualitative change in the composition of capital is a remedy.

• This temporarily alleviates the situation of the individual capitalist.
• But it makes matters worse in the end.

So capital falls as it yields to the pressure of a falling rate of profits.

This is because:

• constant capital increases relative to variable capital
• if wages rise and hours are shortened, then value falls

Capital will seek countries with cheap labor and little mechanization.

Thus, capital is exported into undeveloped countries.

It turns into colonization if the undeveloped country is brought into political subjection in order to safeguard the investment against:

• the hostile natives
• competition from other capitalist countries

Colonial expansion is prompted by a falling rate of profit in the capitalist countries.

And so Marxists speak of imperialism as the last stage of capitalism.

Marx did not stress the resulting tendency toward:

• monopolistic restriction of output
• protecting the domestic game preserve against the intrusion of poachers from other capitalist countries.

But the Neo-Marxists did.

This leads to modern protectionism.

Note one more hitch in that process that will stand the Marxist in good stead in the task of explaining further difficulties. When the undeveloped countries have been developed, capital export of the kind we have been considering will decline.

There may then be a period during which the mother country and the colony will exchange, say, manufactured products for raw materials.

But in the end the exports of manufacturers will also have to decline while colonial competition will assert itself in the mother country.

Attempts to retard the advent of that state of things will provide further sources of friction, this time between each old capitalist country and its colonies, of wars of independence and so on.

But in any case colonial doors will eventually be closed to domestic capital which will no longer be able to flee from vanishing profits at home into richer pastures abroad.

Lack of outlets, excess capacity, complete deadlock, in the end regular recurrence of national bankruptcies and other disasters—perhaps world wars from sheer capitalist despair—may confidently be anticipated.

History is as simple as that.